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Global equity index dips while yields fall; investors await inflation prints

A global equities index fell slightly on Tuesday while Treasury yields rose as investors awaited inflation data due later in the week for potential clues about the outlook for U.S. interest rates.

U.S. Treasury yields turned positive after the latest crop of U.S. economic data. U.S. consumer confidence unexpectedly improved in May amid optimism about the labor market after deteriorating for three consecutive months, a survey showed. Earlier data showed U.S. house price growth slowed sharply in March, likely as rising mortgage rates weighed on demand.

Investors are waiting for U.S. inflation data with the U.S. core Personal Consumption Expenditures Price Index report for April, due on Friday. The Fed’s preferred inflation barometer is expected to hold steady on a monthly basis.

“The Fed is still in play. … Real interest rates need to come down,” said Kim Forrest, chief investment officer at Bokeh Capital Partners. “Overall, inflation is trending down, and slowing inflation will give the Fed cover to lower rates.”

On Tuesday, the Dow Jones Industrial Average fell 160.86 points, or 0.41%, to 38,908.73, the S&P 500 lost 0.90 points, or 0.02%, to 5,303.82 and the Nasdaq Composite gained 66.46 points, or 0.39%, to 16,987.26.

Also inflation data in the euro zone is released later in the week.

MSCI’s gauge of stocks across the globe fell 1.17 points, or 0.15%, to 792.18 while Europe’s STOXX 600 index fell 0.72%.

In Treasuries, yields initially slipped after the house price data but regained some ground after the consumer confidence survey release.

The bond market is also facing massive supply on Tuesday with the auction of $69 billion in new U.S. two-year notes and $70 billion in five-year Treasuries.

The yield on benchmark U.S. 10-year notes rose 1.4 basis points to 4.487%, from 4.473% late on Friday.

The 30-year bond yield rose 3.3 basis points to 4.6104% from 4.577% late on Friday.

The 2-year note yield, which typically moves in step with interest rate expectations, fell 2.4 basis points to 4.9289%, from 4.953% late on Friday.

In currencies, the dollar index, which measures the greenback against a basket of currencies including the yen and the euro, fell 0.09% at 104.47, with the euro up 0.12% at $1.0871. Against the Japanese yen, the dollar strengthened 0.01% at 156.87.

Global oil prices were higher as the prospect of OPEC+ maintaining oil supply curbs at its June 2 meeting and hopes of strong U.S. summer fuel demand balanced concern about higher-for-longer U.S. interest rates.

U.S. crude CLc1 gained 2.26% to $79.48 a barrel and Brent LCOc1 rose to $83.8 per barrel, up 0.84% on the day.

Gold prices held steady, buoyed by a slight pullback in the dollar as investors looked forward to U.S. inflation data.

Spot gold added 0.18% to $2,354.98 an ounce. U.S. gold futures GCc1 gained 1.17% to $2,359.70 an ounce.

(Reuters)

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